Landlords can write off costs of building defects against tax but not owner-occupiers

Minister for Finance Paschal Donohoe has confirmed landlords can write off the costs of construction defects against their tax liabilities but owner-occupiers and social landlords cannot.

Advocacy groups for owners have estimated that up to 92,000 apartments built during the boom in Ireland could be affected by defects such as a lack of fire-stopping material that costs on average €15,000 per unit to fix.

Some owners are facing bills of up to €60,000 to remediate severe mould, collapsing roof canopies, rotting balconies and an extensive lack of fire-safety measures.

In a parliamentary question to Mr Donohoe, Labour Party TD Ged Nash asked if landlords of apartments and duplexes could write off levies to fund the remediation of defects against their tax liabilities, and if the same tax write-off facility would be extended to owner-occupiers.

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In response, Mr Donohoe said “service charges and levies that are imposed by management companies are deductible against the landlord’s rental profits.

“Local authorities are exempt from income tax and are not subject to corporation tax, and approved housing bodies that have charitable status would benefit from the charitable tax exemption, and therefore tax deductibility of service charges would not be relevant to such entities,” he wrote.

“I have no plans at present to extend to other apartment and duplex owners the facility to write off service charges and remediation levies against tax liabilities.”

Large sums

Kath Cottier, a spokeswoman for the Construction Defects Alliance – which represents owners affected by the issues – described the situation as “discrimination” against owner-occupiers and social landlords and said it needed to end.

“For owner-occupiers, these large sums of money often have to be paid in one tranche on top of their mortgages as well as rising service charges and insurance costs. In relation to local authorities and housing associations, the payment of defects bills reduces by many millions of euro the money these bodies have available to house people who cannot afford to buy or rent commercially.

"The Construction Defects Alliance is calling on the Government and the whole Oireachtas to ensure that this blatant discrimination is ended in Budget 2022 in less than two weeks' time."

The alliance earlier this year sent a submission to Government urging the inclusion of a tax-relief scheme in Budget 2022, proposing a tax relief for owner-occupiers who have paid or are paying for defect remediation work and a VAT rebate for social housing providers.

Such a scheme would cost the State a maximum of €7.3 million, the alliance estimates. It said it would also would help to address aspects of the issue while the Government-appointed working group – set up to examine the issue of housing defects – finalises a more comprehensive set of measures.